A Buddhist monk tolls a bell during a ceremony to pray for a better future in Hong Kong moments before the stroke of midnight Sunday, the 10th anniversary of Hong Kong's handover to Chinese rule from British colonial power.

HONG KONG — Hong Kong’s red flag was raised into a cloudy blue sky Sunday as the former British colony marked the 10th anniversary of its hand-over to China and bid farewell to a rocky decade of financial woes, disease outbreaks and economic recovery.

The next 10 years could be just as challenging for the bustling city on southern China’s coast. Hong Kong will likely grapple with democratic reform and face growing competition from other Asian cities threatening its position as a global business capital.

“The upcoming challenges for Hong Kong are not only coming from nearby places. We have to compete with the whole world,” said the city’s leader, Donald Tsang, a bow tie-wearing veteran civil servant who was sworn in Sunday for a second term.

A few hundred people stood near Hong Kong’s harbor to watch the ceremony attended by dignitaries. The crowd erupted with cheers when four helicopters carrying Hong Kong and Chinese flags flew over the area.

Not all celebrationShouting “Power to the people,” a small band of protesters tried to march on the flag-raising ceremony, but they were blocked a few yards away by police. The group, led by radical lawmaker Leung Kwok-hung, tried to burn an effigy of what they said was the “butcherous” Chinese leadership, and police doused them all with fire extinguishers.

About an hour later, Chinese President Hu Jintao gave Tsang his blessings and praised Hong Kong for getting through a turbulent decade. He also said Hong Kong’s “democracy is growing in an orderly way,” but he didn’t clearly state when the city should have full democracy.

Hu planned to leave Hong Kong before pro-democracy groups hold an annual street protest in the afternoon. Although the city has one of Asia’s most prosperous and well-educated societies, Hong Kongers still can’t directly elect their leader and entire legislature.

Tsang was selected by an 800-seat election committee dominated by Beijing loyalists. Only half of the 60-seat legislature is directly elected, and the other members are picked by professional and special interest groups.

Although Beijing has promised that Hong Kong will eventually get full democracy, the Communist leadership has yet to say when it will happen. The British also denied the city full democracy during their 156 years of ruling the territory on China’s southern coast.

Since Hong Kong returned to China, the city has been governed under a “one country, two systems” formula. The arrangement has allowed the territory to keep its capitalist economy, British-style legal system, free press and civil liberties.

Nir Elias
/
Reuters

A protester protects himself as police use fire-extinguishing powder during a pro-democracy demonstration in Hong Kong on Sunday.

For the most part, Beijing has honored its promise to let Hong Kong enjoy a wide-degree of autonomy. But critics say the media commonly practice self censorship, and Chinese officials indulge in behind-the-scenes meddling.

In many ways, Hong Kong has grown closer to the motherland — which has been vital in helping the city recover from the Asian financial crisis that erupted one day after the 1997 hand-over.

Ties to Beijing yield benefits
Hong Kong has become tightly linked to the mainland’s galloping economy and has positioned itself as a key entry point to the Chinese market. Hong Kong companies are heavily invested in southern China’s booming Pearl River Delta region, employing more than 10 million factory workers.

China has also given Hong Kong’s economy a big boost by allowing more mainlanders to visit the city. Hong Kong’s hotels, shopping malls and restaurants have become addicted to the big-spending tourists. Last month, about 1.2 mainlanders visited, a 16 percent increase from the same period last year, the Tourism Board said.

The tourists helped pull the economy out of recession caused by the 2003 outbreak of SARS, or severe acute respiratory syndrome. The disease killed 299 people here and devastated the tourism industry.

Although the mainland makes a great partner in many ways, it’s also a fierce competitor.

The red-hot stock market in Shanghai is competing with Hong Kong for Chinese companies seeking new stock listings. And Shanghai’s port surpassed Hong Kong’s this year as the world’s second busiest behind Singapore. Another port in Shenzhen is expected to overtake Hong Kong next year.

Still, Hong Kong is famous for reinventing itself and meeting challenges. It may have to rely on those talents more than ever in the next 10 years.

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